Justices Side With Free-Speech Challenge to Credit Card Fees

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The case before the Supreme Court was part of a long-running dispute between some merchants, who want to steer customers toward using cash, and credit card companies, which want to make their fees invisible to consumers.CreditAl Drago/The New York Times

The decision was a victory for five businesses that had sought to tell their customers that they imposed a surcharge for using credit cards. But the Supreme Court decided only that the law regulated their speech rather than their conduct, and it left it to an appeals court to determine whether the law violated the First Amendment.

“The law tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer,” Chief Justice John G. Roberts Jr. wrote for the majority. “Sellers are free to charge $10 for cash and $9.70, $10, $10.30 or any other amount for credit. What the law does regulate is how sellers may communicate their prices.”

The case, Expressions Hair Design v. Schneiderman, No. 15-1391, is part of a long-running dispute between some merchants — who want to avoid fees charged by credit card companies by steering customers toward cash — and credit card companies, which seek to make the fees invisible to consumers.

The New York law, similar to ones in nine other states, bars merchants from imposing surcharges when their customers use credit cards. Credit card companies charge fees to merchants in the range of 2 to 3 percent, Chief Justice Roberts wrote.

“Those fees add up, and the merchants allege that they pay tens of thousands of dollars every year to credit card companies,” he wrote. “Rather than increase prices across the board to absorb those costs, the merchants want to pass the fees along only to their customers who choose to use credit cards. They also want to make clear that they are not the bad guys — that the credit card companies, not the merchants, are responsible for the higher prices.”

The New York law, enacted in 1984, makes it a crime to impose a surcharge for the use of credit cards. The law was for many years almost irrelevant, as credit card companies imposed similar rules in their merchant contracts.

But credit card companies started to back away from those restrictions as part of class-action settlements. Not long after, several New York merchants sued to challenge the law on First Amendment grounds.

The question for the court was a limited one, the chief justice wrote. It was, he said, whether the First Amendment figured in the analysis of a law that barred some kinds of communications from businesses to their customers. He gave two examples involving the plaintiffs in the case.

“In regulating the communication of prices rather than prices themselves,” Chief Justice Roberts concluded, the New York law “regulates speech.”

Justices Anthony M. Kennedy, Clarence Thomas, Ruth Bader Ginsburg and Elena Kagan joined the majority opinion. Three justices voted with the majority but did not adopt its reasoning.

In a concurrence, Justice Stephen G. Breyer repeated his view that the Supreme Court has entered dangerous territory in subjecting laws regulating economic matters to heightened First Amendment scrutiny. He agreed that the New York law concerned speech, but he said it probably warranted “a deferential form of review” because it seemed to have only a minimal effect on “the interests that the First Amendment protects.”

“I agree with the court that New York’s statute regulates speech,” Justice Breyer wrote. “But that is because virtually all government regulation affects speech. Human relations take place through speech. And human relations include community activities of all kinds — commercial and otherwise.”

In a second concurrence, Justice Sonia Sotomayor, joined by Justice Samuel A. Alito Jr., wrote that the majority had decided little about a confusing statute. Justice Sotomayor said the proper course, and one she urged the federal appeals court in New York to adopt when it again confronted the case, would have been to ask New York’s highest court for a definitive interpretation of the state law.